Correlation Between Realty Income and TRAVEL +

Can any of the company-specific risk be diversified away by investing in both Realty Income and TRAVEL + at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Realty Income and TRAVEL + into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Realty Income and TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on Realty Income and TRAVEL + and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Realty Income with a short position of TRAVEL +. Check out your portfolio center. Please also check ongoing floating volatility patterns of Realty Income and TRAVEL +.

Diversification Opportunities for Realty Income and TRAVEL +

-0.5

Correlation Coefficient

Realty Income  TRAVEL +

Very good diversification

The 3 months correlation between Realty and TRAVEL is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL and Realty Income is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Realty Income are associated (or correlated) with TRAVEL +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of Realty Income i.e., Realty Income and TRAVEL + go up and down completely randomly.

Pair Corralation between Realty Income and TRAVEL +

Assuming the 90 days horizon Realty Income is expected to under-perform the TRAVEL +. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 1.93 times less risky than TRAVEL +. The stock trades about -0.05 of its potential returns per unit of risk. The TRAVEL LEISURE DL 01 is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  3,500  in TRAVEL LEISURE DL 01 on April 22, 2025 and sell it today you would earn a total of  1,360  from holding TRAVEL LEISURE DL 01 or generate 38.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Realty Income  vs.  TRAVEL LEISURE DL 01

Realty Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Realty Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TRAVEL LEISURE DL

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, TRAVEL + reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Realty Income and TRAVEL +

The main advantage of trading using opposite Realty Income and TRAVEL + positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income position performs unexpectedly, TRAVEL + can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in TRAVEL + will offset losses from the drop in TRAVEL +'s long position.

The idea behind Realty Income and TRAVEL LEISURE DL 01 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.